Electric vehicles will make up the majority of new car sales worldwide by 2040, and account for 33% of all the light-duty vehicles on the road, according to new research Electric Vehicle Outlook 2017 (EVO 2017) published by Bloomberg New Energy Finance (BNEF). The forecast draws on detailed analysis of likely future reductions in price for lithium-ion batteries and of prospects for the other cost components in electric vehicles and internal combustion engine, or ICE, vehicles. It also factors in the rising electric vehicle commitments from automakers and the number of new electric vehicle models they plan to launch.
The central finding of the research is that the electric vehicle revolution is going to hit the car market even harder and faster than BNEF predicted a year ago. The team now estimates that electric vehicles will account for 54% of all new light-duty vehicle sales globally by 2040, not the 35% share it forecast previously. By 2040, electric vehicles will be displacing 8 million barrels of transport fuel per day, and adding 5% to global electricity consumption.
BNEF sees a inflection point for the global auto industry in the second half of the 2020s. Consumers will find that upfront selling prices for electric vehicles are comparable or lower than those for average ICE vehicles in almost all big markets by 2029.
The forecast shows electric vehicle sales worldwide growing steadily in the next few years, from the record 700,000 seen in 2016 to 3 million by 2021. At that point, they will account for nearly 5% of light-duty vehicle sales in Europe, up from a little over 1% now, and for around 4% in both the U.S. and China.
However, the real take-off for electric vehicles will happen from the second half of the 2020s when, first, electric cars become cheaper to own on a lifetime-cost basis than ICE models; and, second – arguably an even more important moment psychologically for buyers – when their upfront costs fall below those of conventional vehicles.
The key component of an electric vehicle – the battery – is set to plunge in price, building on recent, remarkable cost declines. Since 2010, lithium-ion battery prices have fallen 73% per kWh. Manufacturing improvements and more than a doubling in battery energy density are set to cause a further fall of more than 70% by 2030.
The result will be rapidly rising market shares for electric vehicles in the biggest markets, even with oil prices staying low. BNEF sees them accounting for nearly 67% of new car sales in Europe by 2040, and for 58% in of sales in the U.S. and 51% in China by the same date. Countries that have made early progress in electric vehicle uptake are expected to be among the leaders in 2040, including Norway, France and the U.K. Emerging economies such as India are forecast not to see significant electric vehicle sales until the late 2020s.
BNEF’s forecast is based squarely on the relative economics of electric vehicles and ICE cars. It assumes that current policies to encourage electric vehicle take-up continue until their scheduled expiry, but does not assume the introduction of any fresh measures. BNEF analyzed the auto market not just by country but also by car segments.
The team incorporated work into their electric vehicle forecast on two other hot topics in the transport revolution – autonomous vehicles, and ride sharing. It concluded that the impact of autonomous driving will be limited in the next 10 years but will play an increasing role in the market after 2030, with 80% of all autonomous vehicles in shared applications being electric by 2040 due to lower operating costs.